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University of Cambodia

Content at a Glance I. Introduction II. Forms of Business in

Cambodia

Sole Proprietorship Partnership Corporation

Private Limited Company

Public Limited Company

III. Conclusion

Principles of Accounting (AC101)

Assignment Paper Forms of Business in

Cambodia

Session: Evening Lecturer: Ros Sokheng Group Members:

Siem Pichnorak Leang Sreyleak Ruon Sophina Naing Youswerithy Nov Makara

Submitted on: April 04, 2011

University of Cambodia Lecturer: Ros Sokheng

Principles of Accounting (ACC101) Group 1

1

Acknowledgement

The completion of this assignment papers would not have been possible without consultation

and valuable advices from lecturer as well as the group members who have always been ready to

discuss and share ideas which are indispensible for this assignment. Basically, we would like to

show our gratitude to the lecturer, Mr. Ros Sokheng, who has always guided and given valuable

ideas and advices for the topic of this assignment. Besides, group members are the indispensible

elements to achieve this assignment—members who are always ready to contribute ideas,

confidences, experiences, and time to discuss and share.

This assignment is just a small contribution. However, it would somehow help readers to

understand about forms of businesses in Cambodia and how to establish those businesses in term of

legal process within Kingdom of Cambodia law suits. We strongly believed that this assignment will

inevitably contain some mistakes. In order to improve this assignment papers, we are satisfied to get

feedbacks and constructive comments from readers to make this assignment better and more

impressive.

Group 1



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Table of Content

Acknowledgement.......................................................................................................................... 1

I. Introduction ................................................................................................................................. 3 1. Background ................................................................................................................................. 3 2. Investment Environment ........................................................................................................... 3 3. Taxation System........................................................................................................................... 4 4. Business Entity ............................................................................................................................ 4

II. Forms of Business in Cambodia ........................................................................................... 6

1. Sole Proprietorship ............................................................................................................. 6

Definition ............................................................................................................................. 6 Sole proprietorship overview ............................................................................................. 6 Nature and Key conditions of sole proprietorship ........................................................... 6

2. Partnership ........................................................................................................................... 7 Definition .............................................................................................................................. 7 Partnership overview .......................................................................................................... 7 General Partnership ..................................................................................................... 7

A. The establishment of General Partnership ............................................................. 7

Form of Contract ................................................................................................... 7

Name and Nationality .......................................................................................... 7

Responsibility and Partnership ............................................................................ 8 B. Relations of Partners to One Another ...................................................................... 8

Management ........................................................................................................... 9 C. When a person Ceases to be a General Partnership .............................................. 10 D. Dissolution and Liquidation of General Partnership ........................................... 10

Limited Partnership ..................................................................................................... 11 A. The establishment of Limited Partnership ............................................................. 11

Form of Contract ................................................................................................... 11

Name ..................................................................................................................... 11 B. Relations of Partners to One Another ..................................................................... 11 C. Dissolution and Liquidation of General Partnership ............................................ 11

3. Corporation ...................................................................................................................... 13 Private Limited Company ........................................................................................... 13 Public Limited Company ........................................................................................... 14

Company Character ............................................................................................. 14

Creation of Company ........................................................................................... 14

Conversion of Private Limited Company to Public Limited Company............ 15

Conversion of Public Limited Company to Private Limited Company............ 15

III. Conclusion ............................................................................................................................... 16

Reference ............................................................................................................................................ 17



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I. Introduction

1. Background

Cambodia, officially known as Kingdom of Cambodia, is located in Southeast Asia and is a

member of ASEAN. Demographically, there are around 14 million people in Cambodia, 80% of

which is recruited in agricultural sector. Cambodia has gone through a long history of wars and civil

wars for over three decades—it has been devastated to the basic. After 1993 Paris agreement,

Cambodia has started its political and economic reforms—from communism to democracy, and

from planned market to free market. All these reforms have helped Cambodia to emerge as a high

growth economy and attract foreign investors to invest in many potential sectors. Since 1993, direct

and indirect foreign investment has significantly increased, especially 2008 and 2009. Cambodia

economy has been recently projected to increase up to 6% in 2011 although it has been affected by

world economic crisis influences in 2009 (ADB Reports)1.

2. Investment Environment

Investment environment in Cambodia has been significantly improved after its participation

in WTO in 2004. As a WTO member and least-developed country, Cambodia benefits from

preferential access to a number of markets. Besides, Royal Government of Cambodia has proved

itself welcoming foreign investors by impose more agreement with foreign partners, laws, and

policies that encourage foreign investors to put their investment in the country. In particular, the tax

holiday cuts the profit tax from 20% to 0% for a specific number of years for QIPs (Qualified

Investment Projects), and all QIPs are exempted from import duties on construction materials,

production equipment, and input materials. To insure investment environment in the country, RGC

has tried to maintain political stability and security within the country—more stability, more

investment. On top of that, there are many plentiful resources which haven’t been exploited within

the territory of Cambodia such as mineral resources. Likewise, Cambodia consists of many attractive

tourism destinations—especially Angkor Wat—which attract both tourists and investors. Last but

not least, cheap labour force is another incentive for foreign investors. Ministry of Commerce and

the Council of Development of Cambodia are two major institutions that responsible for controlling

direct foreign investment as well as business development in Cambodia.

1 http://www.rfi.fr/actukm/articles/124/article_5138.asp



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3. Taxation System

Taxation system in Cambodia is more lenient in comparison to most neighboring countries in that

corporate tax rates are low, and legal requirement process is easy to accomplish and streamlined. All

business bodies are taxable under the Shelf of Assessment System (Real Regime Tax System)—it

depends on types of business activities or level of annual revenues. Real regime system taxpayers

must annually submit a tax declaration, a balance sheet, results account and tables of

complementary information to the tax administration. The Ministry of Economy and Finance (MEF),

Department of Taxation, requires all registered businesses in Cambodia to register with the tax

department to obtain taxpayer identification number within fourteen days of operating a business.

Companies are generally subject to an annual business registration tax (the Patent Tax), a Profit Tax

(20%, or a Minimum Tax of 1% or turnover) and VAT charges (10%), as well as the Salary Tax for

employees (0%-20%), and a Rental Withholding Tax (10%). While there is a 20% dividend

withholding tax (basically a salary or profit tax on the recipient), this is not double taxed.

The following is the table of taxes of business activities in Cambodia.

Business Activity Tax on Profits

General Business

Natural Resources Exploitation

Insurance

Tax-exempt QIP

QIP during transition period

20%

30%

5%

0%

20%

Source: BNG Legal 2010 (Investing in Cambodia)

4. Business Entity

As economy increasingly grows, more business activities are developing from day to day. To

maintain the process day to day business, legal procedures are being taken in business activities. As

businesses grow, complexity of legal processes also grows. In Cambodia, Ministry of Commerce is a

main institute that maintains business activities. In order to establish a business, business owner are

required to register and fill up registration form at Ministry of Commerce. Principally, all businesses

that conduct their business activities in the territory of Cambodia must be registered. The

registration must be made by company’s incorporator or direction within the month of

establishment or within 15 days prior to the commencement of its establishment. A limited liability

juristic person must have at least KHR 20 million in capital. Moreover, the company must deposit

KHR 4 million into a company bank account to satisfy the Commercial Incorporation’s Capital



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Requirement. There are three major forms of business in Cambodia namely: Sole Proprietorship,

Partnership, and Corporation. Each form of business requires different legal procedures to

establish, and those procedures will be mentioned in the next section of forms of business in

Cambodia.

The following is table of CDC-registered business sectors in Cambodia from 1998 to 2008.

CDC-REGISTERED INVESTMENT, BY SECTOR, 1998-2008

Sector US$ Million Number of projects

Garments

Tourism

Petroleum

Agriculture

Wood Processing

Telecommunications

Food Processing

Construction

Footwear

449.4

434.4

203

177.1

98.3

92.5

91.5

63.6

27.8

401

88

5

74

15

15

12

14

21

Total 2,432.4 88

Source: CDC 2009

New Business To-Do List

Open a bank account and deposit the required amount

Check the uniqueness of the company name, and register any trademarks

Incorporate with the Ministry of Commerce

Obtain a Tax Identification Number and pay the Patent Tax

Make the declaration to the Ministry of Labor

Obtain all licenses necessary for the business activities

Source: BNG Legal (Establishing a Business in Cambodia)



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II. Forms of Business in Cambodia

1. Sole Proprietorship

Definition:

A sole proprietorship is an enterprise which is established and operated by a single natural

person who is the owner of all its capital. The obligations and liabilities incurred in the operation of

the business are thus his/her sole and exclusive responsibility.

Sole proprietorship overview:

In a Sole Proprietorship, all accounts, contracts, property, and licences are taken in the name of

the owner (the Sole Proprietor/entrepreneur). The Sole Proprietor has independent control of the

business and rights to all profits. Profits are directly taxable and business affairs are easily mixed

with personal affairs. He or she is also personally liable for all debts and obligations of the business.

The sole-proprietor provides all the start-up capital - often this will involve a bank loan secured by a

mortgage on the sole-proprietor’s home or an unsecured loan from friends and family. The sole-

proprietor may be bankrupted by the creditors if the business fails to honor its debts. The business

does not continue after the proprietor’s death.

Becoming a sole proprietor is the most straightforward way to set up in business, since it is quick

and easy and involves minimal form-filling associated with the setting up and running of a limited

company. However, the sole proprietor does not have a separate legal entity like the distinct legal

identity of a company. Therefore, the sole proprietor is personally liable for the debts and liabilities

of the business. The sole proprietor, as a natural person (that is, a human being as opposed to an

artificially created legal entity), is the business entity.

Nature and key conditions of sole proprietorship

Major Advantages Independence, all management decision by proprietor, flexibility, minimum of legal requirements.

Major Disadvantages Unlimited liability, limited management ability, limited investment potential.

Liability The sole proprietor has unlimited liability for the debts and liabilities of the business. That is, their personal assets could be at risk if liabilities of their business activities cannot be settled.

On-going compliance Ongoing requirements are less onerous for sole proprietorships than for corporate vehicles.



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2. Partnership

Definition:

A partnership is a contract between two or more persons to combine their property, knowledge

or activities to carry on business in common with a view to profit.

Partnership overview:

The majority of partnerships are small businesses, often involving retailing, building or the

professional series such as accountants, doctors and solicitors and there are only up to 20 partners

who are allowed in any one partnership. To begin with partnership business, there are more people

involved in running the business allows the partners to specialize where possible. There are two

different partnerships in business activities which are general partnership and limited partnership.

General Partnership

A. The Establishment of a General Partnership

A general partnership is a contract between two or more persons to combine their property,

knowledge or activities to carry on business in common with a view to profit.

Contract

The contract of general partnership may be verbal or in writing. If the general partnership

contract is in writing, all partners shall sign it. When a general partnership is formed, the parties are

bound to the contract at the time the contract is made, unless the contract states otherwise. When the

contract is ambiguous the court shall consider the following rules to determine whether the parties

had a common intention to form a general partnership:

(a) The fact that two or more persons jointly own property, whether the persons share in the

profits made by the property or not, whether a general partnership does by itself create a

partnership by the property or not.

(b) The fact that two or more persons share the gross receipts from commercial activity, whether

or not the persons have joint or common rights in any property that generates the receipts,

whether a general partnership does by itself create a partnership by joint or common rights

in any property.

Name and Nationality

Legal personality: A general partnership has a legal personality separate from that of each of

its partners. A general partnership shall acquire legal personality when it registers in accordance

with the Law on Commercial Rules and Register, and shall have the following rights.

(a) To own movable and immovable property in its own name;



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(b) To carry on business in its own name;

(c) To contract in its own name; and

(d) To sue and be sued in its own name.

Nationality: A general partnership that has acquired legal personality shall be deemed to be of

Khmer nationality only if:

(a) The general partnership has a place of business and a registered office located in the

Kingdom of Cambodia; and

(b) More than 51% of the record ownership interest in such general partnership is held by

natural or legal persons of Khmer nationality.

Name of partnership: The name of a general partnership shall include the name of one or more of

the partners, and the words "General Partnership" shall be placed at the end or below the name. A

general partnership shall use its name when carrying on business.

Responsibility of the partnership

Liability for registration, filing and publication: Each partner is individually responsible for

complying with the registration, filing and publication requirements for the general partnership.

B. Relations of Partners to One Another

In the general partnership, each partner may:

(a) Contributions to the general partnership in cash which shall be calculated in the national

currency, in kind, in past services actually rendered or future services. When a general

partner undertakes to contribute a sum of money and fails to do so, the general partner is

liable for interest from the day his contribution should have been made, subject to any

additional damages which may be claimed from him.

(b) Contribution in services consists of the general partner’s knowledge or activities, but shall

not consist of the exercise of influence obtained from public officials. After a general partner

undertakes to contribute knowledge or activities, the general partner owes the obligation

continuously as long as he remains a general partner.

After a partner undertakes to contribute property, the partner shall transfer the rights of

ownership or enjoyment and shall place the property at the disposal of the general partnership. Each

partner who will shares in the profit and losses of the general partnership is a debtor to the general

partnership for everything he promises to contribute to it. The proportion of the interest of each

general partner in the assets, profits and losses is equal unless otherwise provided in the contract

and no general partner is entitled to wages for employment in the general partnership business. The



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share of a general partner in the assets or profits of the general partnership may be used as a

guarantee of personal obligations of that general partner. A general partner is liable to the general

partnership for damages caused the general partner’s fault; however, if a general partner acts in

good faith, has the right to recover the amount of the disbursements or he makes on behalf of the

general partnership and to indemnification for contractual obligations he make sand losses he

suffers in acting for the general partnership.

Receipt of amount by a partner: This article applies where:

(a) A general partner, on his own behalf, and the general partnership are both creditors of the

same debtor;

(b) Both debts are payable; and

(c) The debtor pays the general partner, but not the general partnership. In this case, the amount

the general partner receives shall be allocated proportionately to the personal Claim and the

general partnership’s claim.

Partner and partnership’s property: Each general partner may use the property of the general

partnership, provided he uses it in the interest of the general partnership.

Each general partner may use the property of the general partnership for his personal use provided

that he obtains the unanimous consent of the other general partners.

Each general partner shall use the property of the general partnership in such a way as not to

prevent the other general partners from using it, as they are entitled.

Management

The general partners may decide their respective powers in the management of the affairs of the

general partnership. The general partners may appoint one or more fellow general partners or a

person who is not a general partner to manage the affairs of the general partnership.

The manager may perform any act within his powers, provided he does not act fraudulently. The act

of the manager binds the general partnership. A manager shall be removed by a vote of a majority of

the general partners unless otherwise provided in the general partnership contract. When several

persons are appointed as managers, each manager may act separately unless otherwise provided in

the general partnership contract. The general partners are deemed to have conferred the power to

manage the affairs of the general partnership. Any act performed by a partner in respect of the

common activities of the general partnership binds the other general partners. Every general partner

has the right to participate in general partnership decisions. Unless otherwise provided in the

general partnership contract, decisions are taken by the vote of a majority of the general partners,

regardless of the value of their interest in the general partnership.



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C. When a Person Ceases to be a General Partner

When a person ceases to be a partner: A person ceases to be a general partner of a general

partnership when the person:

- Transfers his interest,

- Dies,

- Is placed under protective supervision bankrupt

- Exercises his right to withdraw,

- Is expelled from the general partnership,

- A judgment authorizes his withdrawal or orders the seizure of his interest.

Unless the general partnership contract provides otherwise, the fact that a person ceases to be a

general partner does automatically cause the dissolution of the general partnership. The general

partnership may continue by unanimous consent of all of general partners and by complying with

filing and registration requirements to reflect the changes in the general partnership.

The general partners may, by a majority vote, agree on the expulsion of a general partner

who fails to perform his obligations or hinders the carrying on of the activities of the general

partnership. In the case of any objection, a general partner may, in these circumstances, apply to the

court for authorization to withdraw from the general partnership. The court shall grant the demand

unless the court considers it more appropriate to order the expulsion of the general partner at fault.

D. Dissolution and Liquidation of the General Partnership

Cause of dissolution: A general partnership is dissolved by the:

(a) Causes of dissolution provided in the contract of general partnership

- The termination of the general partnership’s object,

- The impossibility of accomplishing it,

- The unanimous consent of all the general partners.

(b) The court may dissolve a general partnership for a legitimate cause. Once the general

partnership is dissolved, it shall be proceed with the liquidation of the general partnership.

The general partners shall file a notice of the dissolution in the prescribed form with the

Registrar and appoint a liquidator. The general partners shall immediately publish the notice of

dissolution for four (4) consecutive weeks in a Khmer language newspaper in the Kingdom of

Cambodia published or distributed in the place where the general partnership has its registered

office or in other publications as provided by regulations of the Ministry of Commerce. The notice

published in newspaper shall be set in regulations adopted by the Minister of Commerce.

Liquidator: Upon dissolution of the general partnership, the possession and the use of general



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partnership property is delivered to the liquidator. The liquidator acts with full administration

powers as an administrator of the property, person who to require from the general partners any

documents and any explanation concerning the rights and obligations of the general partnership.

The liquidator first shall pay the salary of employee, tax, and other priority debts, and then

reimburses the capital contributions. The liquidator partitions the remaining assets among the

general partners in proportion to their rights or, if not provided in the general partnership contract,

in equal portions. If the assets include property owned by third parties, the liquidator may return

the property to the third party. The liquidator shall keep the books and records of the general

partnership for ten (10) years from the closing of the liquidation. The liquidator shall keep books

and records for a longer period if they are required as evidence in a proceeding. The liquidation of a

general partnership is closed by the filing of a notice of closure in a prescribed form with the

Ministry of Commerce. The filing of this notice is ceased to exist the legal personality of the general

partner.

Limited Partnership

A. The Establishment of a Limited Partnership

A limited partnership is a contract between one or more general partners who are the sole persons

authorized to administer and bind the partnership, and one or more limited partners, who are

bound to contribute to the capital of the partnership.

Establish

Form of contract

The contract of limited partnership may be verbal or in writing. If the contract is in writing, all

general partners and at least one limited partner shall sign it. The term of the limited partnership

contract may not be in excess of 99 years but may extend. The limited partnership is formed on the

date on which it is registered in accordance with the Law on Commercial Rules and Register. If the

limited partnership is not registered, it is deemed to be a general partnership.

Name

The name of a limited partnership shall include the name of one or more of the general partners,

and the words "Limited Partnership" shall be placed at the end or below the name. A limited

partnership shall use its name when carrying on business.

B. Relations of Partners to One Another

One person can be both limited and general partner. A person may at the same time be both a

general partner and a limited partner in the same limited partnership. A person who is at the same

time both a general partner and a limited partner in a limited partnership has the rights and



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obligations of a general partner. A limited partner’s contribution to capital may consist of a sum of

money or property only. The limited partner may make additional contributions at any time. A

general partner’s contribution to capital may be in cash, in kind, in past services actually rendered or

future services. A limited partner is entitled to receive his share of the profits. If the payment of the

profits reduces the capital of the limited partnership resulting in a deficit, the limited partner who

received the payment shall return the sum necessary to cover his share of the deficit. The limited

partner is liable only to the extent of the sum of money or value of the property he agreed to. A

limited partner whose name appears in the name of the limited partnership is liable for the

obligations of the limited partnership in the same manner as a general partner, unless his status as a

limited partner is clearly indicated. General partners have the rights and obligations of the partners

of a general partnership. General partners shall account for their administration to the limited

partners. The general partners have the obligations to the limited partners’ property of the limited

partnership. The limited partnership contract may not waive this obligation. While the limited

partnership exists, in any manner whatsoever, a limited partner may not withdraw any part of his

contribution, unless the majority of all other partners consent and the property remaining in the

limited partnership after the withdrawal are sufficient to discharge the debts of the limited

partnership. A limited partner may transfer his interest in the limited partnership without the

unanimous consent of other partners.

C. Dissolution and Liquidation of the General Partnership

When the general partners can no longer act, the limited partners may perform any act of simple

administration required for the management of the limited partnership. If the general partners are

not replaced within 120 days, the limited partnership is dissolved. Where the property of the limited

partnership is insufficient, the general partners are jointly and severally liable for the debts of the

limited partnership to third persons. A limited partner is liable for the debts up to the agreed

amount of his contribution, notwithstanding any transfer of his interest. In the case of insolvency or

bankruptcy of the limited partnership, a limited partner may not, in his status as a limited partner,

claim as a creditor until the other creditors of the limited partnership are satisfied.



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3. Corporation

Definition: Corporation is a limited liability business that has a separate legal personality

from its members. Corporations can be either privately-owned or government-owned, and

privately-owned corporations can organize either for profit or non profit. A profit corporation is

owned by shareholders who elect a board of directors to direct the corporation and hire its

managerial staff. A profit corporation can be either privately held or publicly held.

Private Limited Company

A Private Limited Company (PLC) is a business entity which has at least two or more parties

who agree to conduct commercial activity together. All Private Limited Company are subject

commercial registration requirement, which has to be done by the Ministry of commerce. The most

common characteristic of The Private Limited Company is that it is a legal entity which limited the

liability of shareholders and directors; therefore, shareholders and directors are not personally liable

for the company’s debts. A PLC generally can have from two to 30 shareholders. If there will be only

one shareholder, it is called a single member limited company. Normally, a Private Limited

Company has characteristics similar to a Public Limited Company in that it is a separate legal entity

with the right of succession, centralized management, limited liability of shareholders and

ownership divided into shares which may be transferred. Besides this, Private and Public Limited

Company are also have an in common of which a majority of the shareholders and a majority of the

board of directors elect the representative to have the company treated, and the election shall be

made in prescribed form provided by the Minister of Commerce. However, we can differentiate

between Private and Public Limited Company as a private company may have only one director,

but a public company shall have at least three. More than that, a Private Limited Company can has

at least 2 but not more than 30 shareholders at any one time while a Public Limited Company can

possibly has more than 30 shareholders. The Persons who own Private Limited Company’s shares

jointly shall count as one shareholder for this purpose. Additionally, the Private Limited Company

may not offer its shares or other securities to the public generally, but may offer them to family

members, employees and other groups with common family or business interests, yet Public

Limited Company is a form of a limited company that is authorized by the law to issue security in

the public. for example, the Public Limited Company has the right to raise capital by offering shares,

debentures or other securities to the public which are transferable by meeting the disclosure

requirements specified in the law that principally be circulating a prospectus which describes the



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securities, the financial condition and past performance of the company and the prospects and risks

of buying the securities.

Public limited company:

Public Limited Company is a company that offers its securities such as stock, bonds, etc for

sale to the general public, typically through a stock exchange or through market makers operating in

over the counter markets.

Advantages: is able to raise funds and capital through the sale of its securities. This is the reason

public limited company traded corporations are important: prior to their existence, it was very

difficult to obtain large amounts of capital for private enterprises.

Company character:

- Members: 07 people up and no limitation

- Minimum Capital: 100 Million Riel

- All shares can be traded.

Creation of company: there are two conditions requirements

1- Basic Condition:

- Agreement - Capital

- Capacity - Shareholder

- Objectivity - Name of company

- Membership - Company’s Life

2- Form Condition:

- Adequate capital formation

- Inadequate capital formation

- Incorporation

- Article of Incorporation

- Capital Contribution

Board of Director: PLC was leaded by a group of board of director which was selected from the

members of the company. Board of director liability is to response to all of the company problems

which is related to civil case and criminal case.

Share Capital: The member must agree to take some, or all, of the shares when the company is

registered. The memorandum of association must show the manes of the people who have agreed to

take shares and the number of shares each will take. These people are called the subscribers.



15

A company can increase its authorized share capital by passing an ordinary resolution

(Unless its articles of association require a special or extraordinary resolution). A copy of the

resolution must reach companies within 15 days of being passed. No fee is payable to company

house.

A company can decrease its authorized share capital by passing an ordinary resolution to

cancel share which have not been taken or agreed to be taken by any person. Notice of the

cancellation must reach companies within one month. No fee is payable to companies house.

Conversion of a private limited company to a public limited company

Both a private company limited by shares and an unlimited company with a share capital may

re-registered and deliver a copy of the resolution together with an application form to the registrar.

The resolution must also:

- alter the company’s memorandum so that it states the company is to be a public limited company.

- increase its share capital to the statutory minimum of 100 Million Riel.

- make any other alterations to the memorandum so that it conforms to the required for a public

limited company.

- make any required alterations to the articles of association of the company.

The private company if it does not already have sufficient issued share capital must issue

100million Riel in shares a minimum of 25%part paid.

Conversion of a public limited company to a private limited company

In some jurisdictions a public limited company may re-register as a private limited company

or private unlimited company at any time with few formalities:

A court may also order a public company to re-register as private on approving a minute of

reduction of share capital which results in the issued share capital falling below the statutory

minimum. In such a case the court will also specify alterations to the company’s memorandum and

articles. A special resolution to re-register in not required.



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III. Conclusion

As mentioned above, there are three major forms of business in Cambodia namely: Sole

Proprietor ship, Partnership, and Corporation. Different forms of business require different

procedures to register and establish.

Sole proprietorship is a business owned by a single owner and owner is liable for all

debts of the company (unlimited liabilities)—there is no separate legal identity between owner

and company. Due to unlimited liabilities, owner’s personal property may affect in case the

business goes bankrupt or fail to honor its debts. Plus, the business does not continue after the

proprietor’s death.

Partnership is a business own and run by more than one owner but not too many.

Partnership is sub-divided into two, General partnership and Limited partnership. General

partnership has separate legal identity from its owners, meaning it runs in name of company,

not individual’s name, and all general partnerships has to share both profits and losses—

unlimited liabilities. Limited partnership is somehow similar to general partnership; however, in

a limited partnership, there has to be at least general partner who is responsible for unlimited

liabilities, while limited partners are only responsible for limited liabilities. Limited partner

involve directly in the process of a company, and they can receive salary, but general partners

cannot—they receive dividends up to capital invested or unanimous consent.

Corporation is a kind of business which has limited liabilities and separate legal identity

from its owner. Corporation is sub-divided into two, Private Limited Company and Public

Limited Company. There are some differences between these two types of business. Private

Limited Company can only have at most 30 shareholders, while Public Limited Company can

have more than 30 shareholders (stockholders). Besides, Private Limited is not allowed to issue

stock or share to sell in public (capital or stock market), whereas Public Limited Company can

issue stock to sell in public to raise more funds. Private Limited Company can sell its shares

privately in case any shareholders wish to sell their shares or interest to other people.



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Reference

1. BNG Legal, Guide to Business in Cambodia [PDF], February 2010 2. Law on Commercial Enterprise in English [PDF] 3. BNG Legal, Establishing a Business in Cambodia [PDF], March 2010 4. ADB, A Handbook of Commercial Registration [PDF] 5. www.khmer.rfi.fr, accessed on April 02, 2010.

http://www.khmer.rfi.fr/

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